Market developments
Equities:
The economic data to close out the week was seen as a “Goldilocks” scenario by markets, indicating the economy is cooling enough for the Federal Reserve to likely start cutting interest rates as soon as September. The S&P 500 rose by approximately 0.55%, surpassing the 5,100 mark, with the Nasdaq outperforming, fueled by a 6% surge in Apple’s stock as they capped off a busy two weeks of corporate earnings.
Fixed income:
The economic data was seen reviving rate cut expectations and easing recent “stagflation” fears in markets, as a gradual labour market cooldown could allow the Fed to ease policy later this year if inflation cooperates. Treasury yields fell sharply, with 2-year yields dropping as much as 17 basis points on Friday and bond prices ended the week in positive territory as traders now priced in around 50 basis points of Fed rate cuts this year.
Commodities:
The removal of the “war risk premium” that was priced into oil due to escalating tensions between Iran and Israel. As hopes for a ceasefire between Israel and Hamas grow amid international pressure, oil prices have given back gains made since early March and lost -7% to end the week.